The Federal Energy Regulatory Commission should reconsider several key aspects of a recent final rule issued by the Commission that is aimed at removing barriers to the participation of electric storage resources in the capacity, energy and ancillary services markets operated by regional grid operators, the American Public Power Association, the National Rural Electric Cooperative Association and American Municipal Power said in a joint request for rehearing.
FERC issued the final order on Feb. 15. The final rule (Order No. 841) requires regional transmission organizations and independent system operators to revise their tariffs to establish a participation model for electric storage resources that consist of market rules that properly recognize the physical and operational characteristics of electric storage resources.
In their March 19 request for rehearing, the Association, NRECA and AMP said they support the Commission’s efforts to reform wholesale market rules to facilitate greater participation by Electric Storage Resources, or ESRs, in markets operated by RTOs and ISOs.
APPA’s and NRECA’s member utilities have invested in ESRs and distributed energy resource technologies, and where these resources can participate in centralized wholesale markets, public power and cooperative utilities and the consumers they serve may benefit if the market value of those resources can be recognized. These are points that the two associations made in their comments to FERC in response to a notice of proposed rulemaking in the proceeding.
“AMP, APPA, and NRECA agree that RTO and ISO market rules should be structured to accommodate the physical and operational characteristics of ESRs and obtain the full array of benefits these resources can provide in such markets,” they said in their rehearing request.
Storage has the potential to provide significant benefits to the interstate transmission grid and wholesale electric customers, but also to local distribution systems and retail electric customers, AMP, the Association and NRECA went on to say. They cautioned, however, that “[t]his potential will be best realized through a regulatory framework that adheres to principles of cooperative federalism.”
The final rule does not follow such principles, AMP, the Association and NRECA said. “To the contrary, the final rule suggests that ESRs located on a distribution system or behind a retail meter may circumvent restrictions under state or local law on retail customers directly purchasing from, or selling into, the wholesale market -- actions that are beyond the Commission’s jurisdiction to authorize,” the public power and cooperative entities argued.
They said FERC should grant rehearing and unequivocally state that the Commission’s regulations for ESR participation in RTO/ISO wholesale markets are limited to the RTO’s or ISO’s wholesale market rules and do not authorize an ESR to violate state or local laws or regulations or contract rights governing retail electric service or the local distribution of electric energy.
AMP, the Association and NRECA also said the Commission should modify the storage rule and adopt regulations allowing the Relevant Electric Retail Regulatory Authority (RERRA) to decide whether ESRs located behind a retail meter or on the distribution system may participate in RTO/ISO markets. RERRAs are authorities that establish the retail electric prices and policies for customers, such as a state public utility commission, the city council for a municipal utility, or the governing board of a cooperative utility.
“In addition to declaring that the final rule is limited to wholesale market rules and preserves existing state and local authority over retail electric service and local distribution facilities and service, the Commission should grant rehearing and adopt explicit rules under which RTOs and ISOs must respect the decisions of RERRAs concerning the wholesale market participation of ESRs located on a distribution system or behind a retail meter,” they said.
The Commission’s NOPR suggested that such an approach would be appropriate for DERs, including ESRs connected to a distribution system, AMP, the Association and NRECA noted.
In their comments on the NOPR, APPA and NRECA asked the Commission to specifically adopt rules that would allow RERRAs to determine whether distribution-level ESRs should be permitted to participate in RTO/ISO markets.
But the final rule does not acknowledge or respond to the Association and NRECA’s request. “Indeed, it never specifically mentions the RERRA proposal or explains why it is not being adopted. The Commission erred by failing to address the APPA/NRECA proposal altogether in the final rule and the Commission should grant this request on rehearing.”
DER aggregation proceeding
FERC’s NOPR proposed reforms to remove barriers to participation of ESRs and DER aggregations in RTO and ISO markets. For purposes of the NOPR, DERs were defined broadly enough to include ESRs located on a distribution system or behind a retail meter.
In Order No. 841, the Commission determined that it needs more information on DER aggregation before taking final action on the proposed DER aggregation reforms in the NOPR.
To that end, the Commission established a new proceeding (Docket No. RM18-9-000) and established a related technical conference to address issues regarding DER aggregations in RTO/ISO markets. The technical conference will take place in April over two days.
“Because some ESRs may be DERs, and a single ESR may constitute a DER aggregation, the outcome of the proceeding in Docket No. RM18-9-000 regarding DER aggregations should govern the wholesale market participation of distributed storage resources that are simultaneously ESRs and DERs,” AMP, the Association and NRECA said.
“Indeed, it is unclear how the Commission reasonably could adopt final rules governing wholesale market participation by distribution-connected and behind-the-meter ESRs while at the same time deferring consideration of multiple issues related to their participation in the organized wholesale markets.”
AMP, the Association and NRECA noted that the final rule requires RTOs and ISOs to include in their tariffs a participation model for ESRs, recognizing the physical and operational characteristics of ESRs.
Meanwhile, a Feb. 15 Notice of Technical Conference in Docket No. RM18-9-000 includes panels to address, among other things, bidding parameters or other potential mechanisms needed to represent the physical and operational characteristics of DER aggregations in RTO/ISO markets.
Order No. 841 “does not reconcile the decision to adopt rules for ESRs located behind a retail meter or on the distribution system to participate in RTO/ISO markets, with the simultaneous determination that further information is necessary regarding the aggregation of DERs (which may include ESRs) for participation in those same markets,” the Association, AMP and NRECA said.
Moreover, the final rule implicitly acknowledges the difficulties of incorporating distribution level and behind-the-meter ESRs, they said, “but does not provide a reasonable resolution, nor does the final rule specifically indicate that the Commission intends to address these difficult technical and operational issues as part of the DER aggregation proceeding.”
The Commission should clarify that the wholesale market participation by ESRs located on a distribution system or behind a retail meter will be subject to any final rule in Docket No. RM18-9-000, AMP and the two associations argued. This well help to avoid “getting the cart before the horse,” and ensure consistency in requirements and treatment of distribution-level and behind-the-meter ESRs.
Also, FERC should provide that the RTO and ISO tariff revisions made in compliance with the final rule in the instant docket will not become effective as to ESRs located on a distribution system or behind a retail meter until the effective date of the RTO and ISO tariff revisions for DER aggregations made in compliance with any final rule in Docket No. RM18-9-000. “This procedure will enable an orderly consideration and implementation of tariff revisions governing all distributed storage resources,” the Association, AMP and NRECA said.